Agglomeration effects on regional economic disparities: A comparison between the UK and Japan

In this study, the reason and cause of regional economic disparities in terms of per capita value-added are investigated by comparing the UK and Japanese regions. Special attention is paid to agglomeration effects on the differences of regional productivities. The Gini coefficients of per capita values-added exhibit relatively higher levels for the UK regions than for Japanese regions over the period 1995-2003. The cause of this difference is found to be in labour productivities rather than employment rates or labour per population. Furthermore, a decomposition of labour productivity into main industries clarifies agglomeration effects on manufacturing and service-related industry between both countries. Based on these findings, the production functions are estimated by main industries and differences in agglomeration effects on industries between the two countries are examined. Taking a dynamic view of the changing disparities across regions, an increase in regional disparities is associated with the cumulative growth theory.